Indian yogi shows power of local consumer kings

An Indian yogi is demonstrating the power of local consumer champions. Baba Ramdev, a saffron-robed tycoon, says his company, Patanjali Ayurved, doubled sales last year to more than $1.6 billion, making it bigger than the local arms of Colgate and GlaxoSmithKline. His multinational rivals barely grew at all over the same period, as a shock move to scrap bank notes disrupted everyday life. Patanjali's powerful pull underscores a new trend of emerging market consumers attracted to national champions.

The secret of the group's success is complex. Ramdev, the public face and co-founder of the brand, rose to prominence on television practising breathing exercises and his related business has since grown by word-of-mouth. A special report by Reuters, published on May 23, shows the maker of ayurvedic toothpaste and edible oils, founded in 2006, has also received big discounts on land acquisitions in states controlled by the ruling Bharatiya Janata Party in the three years since Prime Minister Narendra Modi came to power. Neither the prime minister's office nor Patanjali responded to Reuters questions on the land sales, which were lawful.

Patanjali might now be worth $9 billion, based on the valuation multiple of almost 6 times sales for its biggest rival, Hindustan Unilever. Margins for the privately held group look healthy for the year to March 2014, the most recent accounts available. Tax breaks have also helped parts of the empire.

Ramdev has tapped into two trends. The first is the rise of nationalism in India, as seen elsewhere in the world. A recent Credit Suisse survey points to case studies from China to Brazil showing local brands in sportswear to pharmaceutical products remaining popular even as consumers become wealthier and aspirations rise. In the past, consumers would have ditched them for international rivals.

A second trend is the move to "naturals", or products made with herbs and other earthly ingredients. These now account for around one-quarter of the toothpaste market, with Patanjali alone claiming 14 percent. That has forced established players like Colgate to introduce things like clove toothpaste. Credit Suisse reckons Patanjali could make similar inroads into areas like juice and biscuits, resulting in more pain for multinationals. The yoga tycoon may further contort the Indian consumer market.